Wednesday, July 28, 2004

Blame Washington if the Power Goes Out

Another item in the Freep today is this article about the blackout last year, and the political stalemate that has led to inaction on Capitol Hill.

Lights on, but next outage is blip away
Little done to prevent repeat of Blackout '03

July 28, 2004

When Americans go home tonight, they will flip a switch and lights will turn on. Their refrigerators will be cold. The phones will ring. Toilets will flush.

But one day almost a year ago, none of those everyday conveniences worked. Some 50 million people -- including 2.3 million in Michigan -- spent Aug. 14 sweating in the dark or pushing their cars to closed gas stations or scrounging for drinking water.

But even during an era marked by terrorist concerns and national security, the nation has done virtually nothing to ensure Blackout 2003 doesn't happen again.

A wave of political outrage, federal investigations, proposed legislation and 46 official recommendations from a U.S.-Canadian task force, have not resulted in any new laws. Most of the task force's recommendations have not been adopted. And as for the political and public outcry, experts say that was gone within a month of the blackout.

The upcoming one-year anniversary of the blackout will be a celebration of apathy. The nation's power grid is caught in political gridlock.

"Most people couldn't tell you what month the blackout happened," said Craig Ruff, president and chief executive officer of Lansing-based Public Sector Consultants. "America has a 24-hour memory. We live in the present tense. The event was widespread and caused a lot of harm, but it was too complex and the public couldn't get it."

Instead of being a national issue, the pressure to prevent blackouts has quietly passed to local utilities and other industry players. Many utilities have purchased new equipment, installed high-tech computer software to monitor the flow of electricity at any given second, but they are the first to admit the improvements are nothing more than Band-Aids on a system that is outdated and overburdened.

Many industry officials say more Americans will have to sweat in the dark before any changes are made to the nation's aging power grid.

"Improving the nation's power grid became a political football between the Democrats and Republicans," said Joe Lucas, a lobbyist for Americans for Balanced Energy Choices, a coal industry supporter. "No one wants to stand up to improve the power grid. No one wants to do it because it isn't easy." [...]

Honestly, I am not satisfied with the explanation.  It would be interesting to know what kind of lobbying went on around this, and how the power structure in Washington created a stalemate.  Clearly, the power companies do not want expensive regulations, and it would be contrary to the spirit of the current administration to impose such regulations. 

According to various estimates (1  2 -- both are small PDF files) the economic cost of the blackout was between 4.5 and 10 billion dollars, from 4PM on August 14th to 4PM on August 17th, 2003.  Note that much of this was due to spoilage of products, and lost output.  Other costs, such as increased costs for fire and police services, get recycled back into the economy.  But lost goods and lost production are simpley lost. 

I have no idea what it would actually cost to prevent another widespread blackout.  But, I do know that almost all of the cost would result in economic activity, such as labor costs and capitol upgrades.  It is pretty obvious which is preferable, from the standpoint of the public good. 

What, then, could account for the inaction?  I have a theory.  Yes, it is an ametuer, armchair-musing-type of theory, but this is a blog, after all.  Electric paower utilities are going to be cautious about major capitol investments, since they now operate in a deregulated market.  The incentive is to keep costs down.  If one company upgrades while others do not, the one that upgrades may have trouble staying competitive.  Thus, any real, major, systematic upgrades would have to be mandated uniformly, to keep a level playing field.  The utilities would have no choice, but to pass the costs on to the consumers.  The increased energy cost would create a temporary dip in the economy.  That would not be acceptable to the current administration in Washington.

Higher energy costs are acceptable in Washington only  if it is the oil companies  that profit.